Aereo has raised an additional $38 million and will be expanding into 22 cities.

The upstart TV digital distributor was launched in March in New York with much fanfare. At a news conference to introduce Aereo, Barry Diller touted that it would break the chains of what he called the “closed cable-broadcast-satellite circle.”

Diller's IAC and other investors like Highland Capital Partners poured some $20.5 million into Aereo initially. These investors are re-upping their commitment as $38 million in a B round of financing was announced Tuesday.

Aereo's new financing and expansion was showcased at the Citi Global Internet, Media & Telecommunications Conference at CES, where Aereo CEO Chet Kanojia gave a talk.

The broadcasters aren't likely to greet the news warmly. Aereo is still in the midst of defending a lawsuit from all of the major TV networks, which contend that the company has infringed copyrights on their programming.

Initially, Aereo was available only in New York City, which was done as much for legal purposes as anything. After Aereo launched and was taken to court by TV broadcasters aghast at a company distributing content to consumer computers, tablets and smartphones without a license, the upstart company fended off a preliminary injunction largely on the basis of legal precedent in the New York jurisdiction. The broadcasters have since made an expedited appeal of the injunction denial and a decision should be coming in the next few months.

In the meantime, bolstered with legal confidence, Aereo says it will be rolling out the expansion through 2013.

Questions remain about whether Aereo has been gaining traction with consumers. In August, the company rolled out a new pricing structure to entice subscribers, offering daily rates as low as $1 as well as different $8 and $12 monthly plans and an $80 annual plan. The company only attracted a few thousand subscribers in the first few months of operation, but Aereo executives say they have been pleased with growth since then, though they have not publicly revealed recent subscriber numbers.

Aereo also has been moving toward positioning its service as one that would give customers an a la carte menu of cable channels (on top of the majors) instead of the bundled packages now distributed by cable and satellite providers. In December, Aereo signed a deal with Bloomberg TV to be the first network it would offer on its service.

Commenting on the expansion and new financing, Kanojia said: “We’ve been working hard to bring Aereo to consumers across the country and we’re excited to expand our reach to these 22 new cities. Consumers want and deserve choice. Watching television should be simple, convenient and rationally priced."